Advantages and Disadvantages of Various Organizational Types
Traditional (classical) Organization
In this form, a general manager has all the functions required to deliver a product or service. The activity groups are headed by department or divisional management. Each department can maintain a high level of technical expertise and focus.
Advantages:
Easier to budget and to control costs.
Greater control of technical resources, since all are managed under the general department or divisional management.
Policies and procedures are consistent among the teams reporting to a common management line.
Vertical communication channels are easily defined.
Reaction times are minimal to address any issue..
Disadvantages:
No individual is responsible for overall deliver of a project.
Coordination of resources outside of vertical communications channels is difficult.
Customer communications are channeled through upper management.
Each functional group can make a play for power within the hierarchy.
Projects tend to fall behind schedule due to the complexities of coordination.
Pure Product (projectized) Organization
In this form, the product manager maintains authority over the project. They can assign work, but also conduct reviews. With everyone reporting up to one person, communication is strong, which results in a very quick reaction time.
Advantages:
Complete authority of resources and over the project.
All work is funneled through the project manager.
Communication is strong with the single reporting structure.
Better morale with more ownership of an individual’s work
More flexibility in making trade-offs with time and costs.
Upper management gains more time for executive decision making instead of dealing with the departmental or divisional issues.
Disadvantages:
Possibility of inefficient use of resources when multiple products are introduced by duplication of effort in resource utilization.
Workload balance must be managed as projects are closed out and started up.
Limited use of advanced technology in project implementations due to a lack of strong functional groups to research and implement.
No transfer of knowledge of lessons learned between projects.
Matrix Organization
This form attempts to merge the advantages of the Traditional and Product Organization structures. The project manager has complete project responsibility, while the functional managers maintain technical excellence in their direct organizations.
Advantages:
The PM maintains complete project control through the resources’ management.
Policies and procedures are set up for each project so that they are meaningful to the project and not more general.
Quick response to changes and resolution.
When a project is complete, work in their own group continues as it was before the project.
Conflicts are minimized and those that do surface are easily remedied by working up the hierarchical management.
Disadvantages:
Information flow moves in multiple directions.
Resources need to report to functional management and to project management.
Management goals can differ from project goals.
Additional time and effort are required to develop the specific project policies and procedures.
While response time can be quick, reaction time can be slow.
Strategic Business Unit (SBU)
In this form, organization separate out business units into their own entities that are responsible for their own promotion of the organizations core businesses. These business units are customer-focused and some resources can be shared across business units. Accounting, training and HR services may be provided by the overall corporate structure.
Advantages:
Customer-focused at the SBU level, leaving the overall organization to focus on running the business
Each SBU can manage its’ own product and project managers.
Disadvantages:
With the ability to share resources across SBUs, the line of management (resource owners) is blurred and can cause confusion.
Conflict can occur at the upper levels of management in the SBU, which will push its’ way down to the resources in the SBU.
